Policy makers and start-up funders say Australia is one of the best at inventing new business ideas, but is the worst at actually turning them into businesses – and there are no quick fixes for this conundrum.
And even if they do start a business successfully, they can still get lost in a funding “valley of death” that plagues companies here as they seek to jump from start-up to sustainable business.
Innovation is code for ‘how do you commercialise and get that out into world markets?’ Bill Ferris, the chairman of government adviser Innovation and Science Australia, told The Australian Financial Review’s Banking and Wealth Summit that innovation, for him, is “code for ‘how do you commercialise and get that out into world markets?’.
“We have this riddle of a first-rate record in research excellence, but we are at number 33 in the 33 countries reporting on [their] collaboration [success],” meaning how well their research centres work with business.
Alex McNab, chief investment officer of Blue Sky Alternative Investments, said he frequently talks to universities and they usually have great research that could be turned into a business, but they almost always have no one who can do that.
“There remains a gap between turning those inputs into outputs and turning a good idea into a business,” he said.
Good teams, good ideas
“I recently met with one of the university commercialisation arms. They gave us their 10 best ideas and they were great ideas. As a venture capital firm, we were saying ‘tell us about the team’. They said ‘there is no team, there is an idea’. We are looking to find good teams with good ideas.”
H2 Ventures’ Ben Heap said there is simply not enough people with actual experience of growing a small company in Australia. This is changing now, however, as companies such as Atlassian have made their founders and many of their employees rich enough to turn their expertise to investing in and helping new companies.
“You need something like the PayPal mafia,” Mr Heap said, referring to the payments company’s founders who have gone on to create new businesses – including Elon Musk, now of Tesla, and Peter Thiel, who is a prominent venture capitalist. “Now we have Atlassian, there are 60 millionaires coming out of Atlassian.”
He said many of the people who could provide the experience are overseas because that is where most of the new opportunities still are, but the government understands well that it needs to try to get them to come back to Australia. It wasn’t clear how that would be done, or how quickly it could happen.
Michelle Deaker, chief executive of fund OneVentures said there is a “valley of death” that many companies fall into in Australia, where they cannot get the extra funding “oomph” they need to make acquisitions to make them sustainable companies and instead end up relying on organic growth.
“The government has a role in filling a structural gap,” Dr Deaker said. “We call it the valley of death or the valley of the slow walk. A lot of these companies are just doing organic growth because they are not really getting the [funding] oomph that will turn them into great companies.”